Two giants sign the underwriting agreement in Beijing

 

On May 25, Huaneng Power International, Inc. ("Huaneng International") and China Construction Bank Corporation (“CCB”) held the signing ceremony of the underwriting agreement on the RMB5 billion of short-term financing bond in Beijing, making the history of issuing the non-financial enterprise short-term financing bond in the Chinese inter-bank bond market.

Shortly after the People’s Bank of China (PBOC) formally promulgated the Rules on Management of Short-term Financing Bond, Huaneng International was approved as the first pilot enterprise to issue the bond and its RMB5 billion financing quota was recognized by the PBOC. CCB is also among the first group of Chinese banks receiving the certificate of lead underwriter for the short-term financing bond issued by enterprises. CCB is not only the first lead underwriter signing the agreement on the RMB5 billion short-term financing bond with Huaneng International but also the only bank underwriting the short-term financing bond of two enterprises at the same time. In addition to the Huaneng International transaction, the bank is also the lead underwriter of the same amount of short-term financing bond for the State Development & Investment Corp (SDIC).

As the pilot enterprise chosen by the PBOC and the biggest listed power company in China, since its establishment 11 years ago, Huaneng International, based on its financial strength and strong capital operation capacity, has successfully built a healthy and dynamic corporate image in the Chinese and international capital markets. In October 1994, the company made an IPO of 1.25 billion overseas listed foreign shares, raising US$625 million which hit a historical high among Chinese enterprises. In May 1997, it successfully issued US$230 million of convertible bonds in overseas market and expanded the financing channels. In January 1998, it completed the global placement of 250 million of foreign shares and the private placement of 400 million of domestic shares to its parent company Huaneng Development Corporation. In November 2001, it issued 350 million of A-shares in the Chinese market. Currently Huaneng International holds 100% of equity in 16 power plants and the controlling equity in 10 power companies. In addition to its interest in another 4 power companies, the company’s total equity installation capacity stands at 21,418 megawatt.

To release the enterprise short-term financing bond in the inter-bank bond market not only expands the direct financing channels of enterprises but also helps make the interest rate more market-oriented and cut financing cost, which has received positive responses from the industrial and banking communities. The transaction poses both opportunities and challenges to CCB. On the one hand, the traditional credit business of commercial banks faces new competitive pressure, and on the other hand the expansion of financing channel is of great importance for the bank to control credit risks, increase the intermediary business revenue, build up the market-oriented pricing capacity, deepen the commercial bank reform, accelerate innovation and raise the comprehensive operational ability. Huaneng International also believes that the issuance of short-term financing bond adds to its channels of raising short-term current capital, effectively cuts the overall financing costs, alleviates the pressure on profit growth caused by hike of fuel price and provides sufficient and low-cost capital support for its operation.

While growing its business through innovation, CCB has been maintaining the leading position among its peers in terms of capital quality and business performance. As one of the four state-owned commercial banks, CCB is accelerating its shareholding reform in accordance with the requirement of the CPC Central Committee and the State Council on the pilot project of commercial bank shareholding reform. With long-term strategic partnership, CCB and Huaneng International share mutual trust and support and seek common development. The signing of the underwriting agreement marks another uplift of the strategic partnership and will surely build up the sound market image of both parties and increase the confidence of Chinese and foreign investors.